Financial Advice from a Divorced Dad

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Financial Advice from a Divorced Dad

Hey everyone! So lately, I've really wanted to use M$M to share financial stories from readers and various personal finance bloggers. When someone else is willing to share the details of something they have dealt with financially, I feel like there's always something that can be learned from it…even if it doesn't necessarily directly apply to my life.

In this case, Robert is sharing something that I hope I never have to go through.

Divorce.

Obviously, it sucks for a number of reasons, but the financial strain alone can be devastating. I've had several M$M readers reach out to me in the past and share what they've gone through financially after a divorce…and it's not pretty.

If you stack a lot of debt on top of that situation, it can get even uglier. Fortunately, people like Robert are willing to share some insight into what the financial strain of a divorce can really look like so that other people can hopefully avoid it in the future. ~M$M

We’ve all heard the statistics, right? A large portion of marriages in the United States will end in divorce.

While that’s not super promising, it is reality, and I happen to be one of those people who fall into the group that decided to get a divorce.

For those of you wondering, I’m now happily engaged and will be getting married again in September, and I could write an entire post surrounding merging the finances of two single parents together into one joint household, but we’ll save that one for another day haha.

I’m not going to go into the details of my divorce because I really don’t think it’s an appropriate thing to do on a financial blog, however, it was my decision to pursue the divorce and I quickly learned that I was not financially prepared to handle that decision.

The truth is, my divorce was a lightbulb moment for me to really get my act together financially, stop carrying massive loads of debt, and make better financial decisions. I made a ton of financial mistakes in my late teens and early 20s, which I outline in detail in this letter to my 16-year-old self. If you’re a younger person, or even if you’re not, you should read this post and learn from some of my mistakes so you don’t make the same ones.

So, here’s the skinny on the financial situation I was in leading up to my divorce with my ex-wife

I’ll outline everything in monthly terms to keep it simple to follow.

Income:

Between the two of us, we made about $70,000-$75,000 per year, pretty decent for our area and our age (both under 30 at the time) considering the average household income in our county is less than $50,000.

That equates to a take-home pay of just about $4,000/mo.

Debts:

Mortgage: $450/mo
Car Lease: $350/mo (Don’t lease a car please, or buy new. More on why here.)
Truck Loan: $250/mo
Student Loans: $50/mo (I used an income-based repayment plan because of all of the other debt, which added about $6,000 in interest to my loan balance. Just pay those suckers off!)
Personal Loans: I don’t remember the exact number but this was around $800/mo
Credit Cards: Varied between $150-$300/mo. We were carrying balances of around $15,000 between 3 different credit cards! Ugh, so stupid!
Medical Debt: $150/mo
Total monthly debt obligations: $2,350
Total Amount of Debt: About $200,000. This includes all debt listed above.

Add in our regular monthly expenses and we were doing just fine even with all of that debt (or so I thought.) We had never missed or even been late on any payments, and had money leftover to do fun activities and the like.

Spoiler alert: We were not fine!

We were buried under massive loads of debt and just transferring debts from one form of debt to another to free up cash. It was a terrible long-term solution.

Our marriage fell apart for personal reasons, not due to money actually, although money problems are a very large contributor to divorce. This is where the debt took a toll!

We were no longer operating with one set of household expenses…

I decided to move out, found a place to rent that was large enough for my 3 children and went for it. But now we had two sets of household expenses. My ex was paying all of the expenses at the house, and I had my own set of expenses at my new rental.

Now that we had all of these additional expenses, there was not enough cash to pay our debt obligations. After consulting a few attorneys, she decided bankruptcy was the best option. Since she was going to file bankruptcy, I’d be left with all of the debts since everything was joint.

I consulted a couple of attorneys as well and agreed this was the best course to take. We filed bankruptcy. Ugh! I hate that word.

Please please please do not take this decision lightly. If you are in that deep of trouble, please consult an attorney or financial advisor to discuss your options.

I learned a ton of things and got myself majorly educated in personal finance throughout this timeframe, and I’ve made it my mission to help others avoid making some of the same mistakes that I’ve made. I’m still dealing with some of the fallout and repercussions of filing for bankruptcy, but I have put a couple things in place to help rebuild things after the bankruptcy and divorce. Feel free to check out what I’m doing here.

Now that you know my backstory, it's time for the advice I’d give to someone standing on the other side:

You never know what the future is going to hold. You never know whether you are going to be divorced, out of a job, downsized, with medical issues, etc. The reality is that we do not know what the future holds for ourselves or our finances.

Start making good financial decisions today so that you are better prepared for the unknown events that may arise in the future.

Do not carry debt like I did. Again, we never even were late on a payment prior to the divorce. Just because you are making your monthly payments does not mean that you are in a good place financially.

Pay down your debt using whatever method works best for you, whether that is a debt snowball as suggested by Dave Ramsey, or a debt avalanche, or some other creative method that you come up with on your own. Focus on paying off your debt so that when the unexpected comes, you aren’t in a bad position where you need to make tough decisions like I did, like filing for bankruptcy.

Question for you (especially if you've gone through a divorce):

What's your best tip you have for someone who is facing something like this?

For sure, it was rough for a while, but I came to the realization that I can use my experiences to help others, so that makes it a little easier to share some of the mistakes and difficult things I’ve been through in the past.

I went through a divorce relatively young and thankfully without children involved. The best advice I can give is to try to remain as amicable as possible with your ex throughout the process. The nastier it gets, the most your attorney’s are going to need to get involved, and the more costly the entire process becomes for both parties.

I agree! While my divorce was anything but amicable, we were able to come to an agreement on everything, or at least an agreement to disagree, outside of the courtroom, so that saved us a ton of money on lawyers.

Thanks for this post and most of all Robert, for sharing your story.What I realized was the the fact that you were paying your debts but it was all bad debts.A lot of people don’t realize we have good and bad debts. We’ve got to pay critical attention and focus on our good debts because it will earn us more money.To end with, it’s not about how much money you make or earn but how much you can pay & invest in yourself.

I’m not divorced…yet…but my marriage feels like it’s heading that way. Money isn’t the main issue, but it is a contributing factor (I’ve also gone a couple years here and there without being employed full-time). I’ve finally sat down and started to look at my finances and try to get them in order. I’m using blogging to keep me on track with this as well as I am a complete idiot when it comes to finances, budgeting, and anything money related (except spending it, I’m really good at that). I’m hoping me writing about it, and people reading about it will keep me motivated to get that part of my life in order and start making better financial decisions.

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